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TheStreet Open House

Bemis' CEO Discusses Q4 2011 Results - Earnings Call Transcript

During 2011, we faced a number of market challenges that led to unsatisfactory financial performance. I'd like to explain the impact of 3 specific challenges we faced in 2011 and why we feel more confident as we look ahead to 2012 and beyond, namely: dramatic resin price increases, challenging customer pricing terms and volume decline.

First, resin prices increased dramatically during the first half of the year. These increases were related to a number of market pressures, some of which were unique to particularly specialty resins. While commodity resin costs weakened during the second half, offering some relief, our specialty resin costs remained flat. Due to the time lag built into our customer pricing agreements that delays our ability to pass along changes in raw material costs, we realized the decline in our profitability throughout the year.

The second major challenge in 2011 was unfavorable price adjustment formulas in certain of our customers' agreements, which delayed our ability to pass along higher raw material costs. We expect to have improved most of our customer pricing agreements to more favorable terms by the end of 2012.

Lastly, during the second half of 2011, unit sales volumes softened in high barrier packaging for meat and cheese, dairy and liquids, specialty food products. This volume decrease was modest, and we believe it was related to the consumer response to higher retail prices in the grocery stores.

We expect these high barrier packaging volumes to grow modestly in 2012 with the commercialization of new business.

In sales of packaging for applications such as confectionery, snack, bakery, pet food and hygiene products, the decline in unit sales volume during the second half of the year was reflective of a combination of weaker consumer demand and specific pricing actions that we have taken to improve our sales mix to generate higher profits.

In the fourth quarter, we began a facility consolidation that includes 3 main categories of activities: plant closings, improved sales mix, rightsizing of administrative work force.

Read the rest of this transcript for free on seekingalpha.com

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